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InsideHSCA is pleased to welcome guest blogger and former Congressman Phil English (R-PA), who was recently named the new Initiative Coordinator for The Healthcare Group Purchasing Industry Initiative (HGPII). HGPII is an independent oversight organization that promotes the highest ethical standards and practices in the group purchasing industry. Mr. English currently co-chairs the Arent Fox Government Relations Practice in Washington, DC.
Q: What do you see as the role of GPOs in the healthcare supply chain?
A: Group Purchasing Organizations play an indispensible role in the healthcare supply chain. These networks apply long-developed expertise to offer providers assistance in making collective purchasing decisions that give them greater reach in a complicated healthcare marketplace.
Healthcare providers that have aligned with GPOs benefit from negotiated pricing that can only be achieved through pooled purchasing with other hospitals, skilled nursing facilities, and health systems. GPOs are containing rising healthcare costs for medical and surgical supplies, medical devices, pharmaceuticals and ancillary services for hospitals an average of 10 to 18% a year.
GPOs add tremendous value for hospitals. In fact, about 98% of all hospitals use GPOs to leverage better pricing for goods and services.
Q: How do GPOs deliver cost savings to the U.S. healthcare system?
A: Healthcare costs continue to increase despite a weakening economy. The prices of healthcare goods and services range dramatically based on the size of the purchasing institution, the setting (i.e., inpatient vs. outpatient), and patient mix.
In certain cases, the federal government has intervened to mandate discounts. For example, Congress passed the Medicaid Drug Rebate program in 1990 in response to increasing volume of drugs being purchased by state Medicaid programs. As a result, drug manufacturers are required to provide the best discounts that other purchasers receive. Likewise, as a tradeoff of providing Medicare drug coverage to seniors, the Affordable Care Act now mandates that drug manufacturers provide a 50% discount on its (brand-name) drugs to seniors in the Medicare Part D doughnut hole.
In both the private and public sectors, healthcare providers are able to achieve discounted pricing for bulk purchasing – similar to how many of us use Sam’s Club for our household purchases. Using the power of market forces, Group Purchasing Organizations help large and small healthcare providers realize cost-savings and better value by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers, distributors, and other vendors. GPOs contract for the best value in their purchase of supplies and services by understanding their members’ needs. This process saves money – without sacrificing quality.
It’s been estimated by a number of studies, that GPOs save our healthcare system between $29 and $64 billion a year – a significant amount in light of the debate we’re having about our nation’s debt and potential cuts to the Medicare program.
Q: How do GPOs foster transparency and accountability? What specific steps have GPOs taken over the years to ensure that the group purchasing industry remains a leader in business ethics and access?
A: GPOs have revolutionized business processes for sourcing, procuring and delivering healthcare goods and services. These improvements include quality control programs, training and education, best practice guidelines and new software systems to streamline business practices and facilitate the movement of products.
GPOs have set the pace in the U.S. healthcare sector for implementing rigorous checks and balances for its industry. To remain competitive and provide increasing value for their customers, GPOs continue to promote best business and ethical practices. Group Purchasing Organizations have been the subject of many research studies and government reviews which provides another layer of oversight and transparency.
Q: What has been the impact of federal healthcare reform on the hospital/GPO relationship? What role can GPOs play for hospitals as states move toward greater implementation of federal healthcare reform?
A: Healthcare reform places tremendous competitive pressure on the entire healthcare delivery system. Providers will be held accountable for meeting higher quality standards. Manufacturers and suppliers face increased regulation and lower reimbursement. All will be challenged to do more with less, and as a consequence the full spectrum of acute and long-term care providers will rely upon GPOs to help improve purchasing practices.
Q: What are the greatest challenges facing the group purchasing industry going forward?
A: GPOs will face enormous challenges in continuing to embrace the highest standards while at the same time adapting to new healthcare technologies in an era of shrinking dollars.
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